F&I

Hybrid Electric Vehicle Sales Soften, NADA Reports

July 8, 2014
• by Staff

MCCLEAN, Va. — Vehicle sales for both new and used have more than weathered the harsh winter storms from earlier this year. The one segment that hasn’t, according to the National Automobile Dealers Association, is hybrid electric vehicles.

The new vehicle seasonally-adjusted annual rate (SAAR) from March through May averaged more than 16 million units, the first time such a streak has occurred since the onset of the recession. The report also noted that May’s SAAR of 16.7 million was the highest figure recorded in more than seven years.

New-vehicle sales, overall, were up 5% in the first five months of 2014, while used-vehicle demand drove up the average price of used vehicles up to 8 years old by 0.5% from April to May. The prices of used cars in that time were nearly 3% higher than they were last year.

Sales of hybrid electric vehicles, however, were down 10% year to date. Sales of Toyota’s Prius were off by 19% and deliveries of the smaller Prius C were down by 1%.

“The drop in hybrid sales amid a market that’s expanding overall means that share for the group has also contracted,” the report read, in part. “Hybrid share of total new-vehicle sales has fallen from 3.1% in 2013 to 2.9% this year, which is the first non-production related decline recorded since 2010.”

Hybrids also retain less of their original value compared to internal combustion engine (ICE) models, with the Prius usually being an exception. That has since changed. Last year, one-year-old Prius retention fell to 70%, three points lower than the Corolla’s 73%. And so far this year, Corolla retention stands at 75%, six points above the Prius’ 69%.

“The recent softness in new hybrid sales and the moderation in used-price depreciation over the past couple of years can largely be tied to relatively consistent gasoline prices and the improved fuel efficiency of ICE models,” the report said.

Going forward, the NADA forecasts that hybrid depreciation will remain higher than depreciation for ICE vehicles. Gas prices are expected to remain at current levels, and with the push for all vehicles to improve fuel economy, “hybrids will likely be more challenged to woo new consumers into the EV fold over the coming years.”

There is much the sales team can do to reduce customers’ wait time and create more opportunities for F&I, but clear instructions and expectations are critical to the success of any attempt to change your dealership’s deeply entrenched processes.